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Super-Rich Private Equity Stars Say They Are Misunderstood And Rue 'Lousy' Reputation

Super-Rich Private Equity Stars Say They Are Misunderstood And Rue 'Lousy' Reputation
While arguing their value to the society was far greater than what the public has so far realized, the ultra-wealthy private equity managers lamented on their reputation of being identified as 'lousy' corporate profiteers while they were at a plush Beverly Hills hotel.
The the fact that companies owned by his private equity business employed about 600,000 people and had grown 50 percent faster, on average, than the S&P 500 Index, was touted by Stephen Schwarzman, chief executive and co-founder of the Blackstone Group.
"The idea that you can do all that and have great success and be perceived at best in a marginal way in terms of contribution to society, you've got to really wonder who’s doing the PR," Schwarzman said during a panel discussion at the Milken Institute Global Conference at the Beverly Hilton hotel.
"People mistake us for financial people. I don’t know exactly why," said Schwarzman - worth some $12 billion, according to Forbes - drawing a distinction between private equity investors which own businesses and mere financiers. "If you had 600,000 employees, you might be a company. A responsible company. And that’s what we are."
Saddling of companies with debt, only to later sell their assets, cut jobs and take out profits and these are the allegations that many have cited as being reasons for criticizing the private equity. While they derive most of their income from fees that are paid by their fund clients, including keeping a cut of investment gains when companies are sold or they go public, private equity executives are considered to be amongst some of the wealthiest people on Wall Street. Billionaires are the founders of most of the biggest firms. And agreeing with Schwarzman was Jonathan Sokoloff, managing partner of private equity firm Leonard Green & Partners.
"We’ve been able to deliver returns for 30 years dramatically in excess of the stock market," said Sokoloff on the same panel. "Notwithstanding that, our industry still has a lousy reputation, we are generally viewed negatively by most people who don’t understand us."
The private equity industry has generally avoided scandal and performed well through the financial crisis of 2008 and at the same time employs hundreds of thousands of people, Sokoloff said.
"We need some better PR and some help in how we market ourselves," Sokoloff said
Very similar views were also expressed at the same discussions by Thomas Barrack, executive chairman of real estate and investment management firm Colony NorthStar Inc.
"People go ‘Oh, you’re in PE, don’t you just go in and buy companies and cut costs and then pray them up and flip them?'" Barrack said. "I say 'No, we’ve never done that. We don’t do that at all. We grow businesses. We create value.'"

Christopher J. Mitchell

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